Easing EU Exports

The EU says its new Rules of Origin agreement with Jordan will give the Kingdom’s exports a much-needed boost and help ease the impact of the Syrian refugee crisis.

 By Dina Al Wakeel

Hosting hundreds of thousands of Syrian refugees has certainly had a discernible impact on Jordan’s already struggling economy. After fleeing their homes more than five years ago, thousands of vulnerable Syrian families have been heavily reliant on the aid given by Jordan, donor countries, and international organizations, adding to the strain on local education and health care services, as well as water resources.

To help Jordan mitigate the impact of the Syrian crisis, in addition to the border closures with both Syria and Iraq that disrupted the flow of Jordanian exports, the EU recently signed a 10-year agreement with the Kingdom that will facilitate the entrance of Jordanian products into its vast market.

Ibrahim Laafia, the EU’s first councilor and head of cooperation, said it’s now up to the Jordanian government and private sector to make the most of the recent agreement.

How will Jordanian companies be able to benefit from this agreement?

The regime applied at the moment is the one used for Least Developed Countries, which allows Jordan goods entry into the European markets duty free with a rather low Jordan content. For instance, in the case of the textile sector, fabric from abroad can be cut, sewed, and packaged in Jordan and shipped to Europe with the “Made in Jordan” tag. The main idea behind the agreement is that we wanted to help the Jordanian economy grow by opening the European market—especially with the closure of the Syrian and Iraqi borders. It’s also a way to help the economy integrate the Syrian refugees, who can then pay taxes and contribute to the economy.

What are the agreement’s main requirements?

There are three main requirements under the new agreement. First, an enterprise has to be established in one of the 18 industrial and development zones included in the agreement. Second, 15 percent of its labor force must come from the Syrian refugee community in Jordan, and this must rise to 25 percent after two years. Third, it should produce one of the 52 agreed-upon product categories, including textiles and other manufacturing sectors.

But statements following the London conference mentioned 200,000 jobs that should be created in Jordan for Syrian refugees. Is that not the case anymore?

This new agreement with Jordan speaks of a target of 200,000 decent jobs for Syrian refugees. Once this number is reached, there is a potential for extending the agreement to the entire country. Today the agreement is limited to 18 development and industrial zones. Syrian refugees with legal jobs in construction, services, and home assistance sectors will also be included in the 200,000 jobs target.

The implementing procedures are under discussion by the Ministry of Industry, Ministry of Labor, the Jordan Investment Commission, Jordan Customs, and the EU. The International Labour Organization is also involved in the process as it will help monitor the implementation of the agreement at the level of the individual factories, in a similar way to the one implemented under the Jordan-American FTA. They will be monitoring the numbers that we agreed on, and also look at the working conditions that should meet international standards in terms of labor, working hours, their rights and duties, as well as meeting the requirements of the Jordanian labor law.

What does Jordan need to do to maximize the outcome of this agreement?

With this agreement the barriers should be lower for Jordanian products to enter the European market. I think there’s a huge potential because the European market is big, offering access to more than 500 million consumers. So for Jordan there is a potential to expand the current low level of exports, which stands at around 350 million euros to the EU per year. What is very important for Jordan is to pursue economic reforms. We also need to have a commitment from the government that it will continue improving the doing business climate in the country. These have to go hand in hand in order to maximize the benefits of this agreement, which will only work if you have reforms taking place to improve and reduce the red tape for companies.

Jordan’s local unemployment rates have also climbed to 14 percent according to public records, and more than 30 percent according to international statistics. What does this agreement mean for those unemployed Jordanians?

I think this agreement is also beneficial for Jordanians because here we are talking about a very low percentage for Syrian labor, just 15 percent, which means 85 percent of the labor can be Jordanian or other nationalities. But in terms of investment, if we have the type of reform that is needed, if we can attract foreign investment and give confidence to Jordanian investors, then that will certainly have an impact on the creation of jobs for Jordanians. Also, there is the fact that the non-Jordanian labor including Syrians is by law restricted to mostly low skilled jobs, so educated labor and white collar jobs will not be impacted by this agreement. These will be reserved for Jordanians.

What challenges do you foresee in the agreement’s application?

There might be some fear by some Syrians to go and register for work permits. I think we need to increase confidence that this potential Syrian labor will not be expelled once they apply for their permits. A good step in the right direction we have seen is a waiver of work permit fees to encourage Syrian refugees to apply, which was extended until September 2016. The second challenge might be the training of the Syrian labor; some jobs might need some training in order for this labor to be competitive and efficient. Some of these industrial zones might also be far away from the zone of residence of the Syrians so there is certainly a challenge in terms of transport and number of working hours that could influence the decision of the Syrian labor. But I think here it’s up to each company to reflect on how they will be attracting Syrian labor to work with them.

Do you think these measures are enough to prevent Syrian refugees from trying to cross over to Europe?

Of course we believe so, if not, we wouldn’t have worked to make this agreement possible in a very short time. We think that this will certainly give a chance for a number of Syrian youth to access the Jordanian labor market. With our higher education and education programs we are also giving them the hope that one day they can go back to Syria with skills that will allow them to reconstruct their country.